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Employment Contract and Agreement

An employment contract is a contract between the employer and the employee defining the terms and conditions of employment.

An Employment Agreement is the sole legal document between the Employer and Employee, which lays out the rights, duties, and obligations of both parties during the employment period. An Employment Agreement is a crucial document in managing employees as it lays down the rights and obligations of both the Employer and the Employee. From junior-most level to the CEO, everyone is an Employee, and to manage the employees efficiently, one needs to have an Employment Agreement.

How to use Employment Termination Notice?

We provide a format which can be used to draft the Employment Contract or Agreement. The notice is usually drafted on a company letter head and is signed and authorised by the employer. The letter usually consists terms, period of the agreement between employer and employee.

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Do not make these Mistakes while Drafting your EA

Elements of Employee Agreements

An Employment Agreement should clearly define the terms and conditions of employment. The most common elements discussed in the Employment Agreement are:

  • Job Description of the Employee
  • Term of the Employment
  • Employee benefits
  • Remuneration/compensation to the Employee
  • Leave Policy
  • Grounds for termination
  • Protection of Confidential information
  • Ownership of Intellectual Property
  • Dispute Resolution
  • Governing laws and jurisdiction
  • Any other provisions deemed to be relevant to the Employer.

In the case of individuals hired on contractual basis for a limited period of time such as candidates hired for specific projects Service Agreement is drafted instead of Employment Agreement.

Position in Law

Employment Agreement has not been mentioned anywhere in the Indian Contracts Act, 1972. Still, as per section 27 of the Act, an agreement, which restrains an individual from carrying on a lawful profession, trade, or business, is void to the extent it restrains them. The restraint has to be reasonable to be permitted by law. Employment policies such as leaves, maternity leaves, working hours, etc. are governed by the applicable Shops and Establishment Act. Other relevant laws that govern various aspects related to employment are Factories Act,1948, The Maternity Benefit Act, 1961, The Payment of Gratuity Act, 1972, etc.

Drafting of Employment Agreement is simple with TAXAJ as it has experienced lawyers who ensure highest customer satisfaction and timely delivery of services. Whole process is managed online, with regular communication and assistance by the professionals available throughout. We have clients in all major cities of India including Mumbai, Delhi, Bangalore, Pune, Ahmedabad, Hyderabad and more as well as our services have equally relevant reach within smaller cities and towns in the country.

Significance of Employment Agreement

Clarity upon Terms of Employment

An Employment Agreement provides clear and detailed information about the provisions like remuneration, working hours, job description, duties, and obligations of the Employee. An Employee would want to be clear about his compensation/remuneration, which is only possible if you have a well-drafted Employment Agreement.

Protection of Trade Secrets

Employment Agreements contain clause relating to the protection of confidential information from disclosure to a third party. This clause states that Employee shall not disclose the confidential information of the organization which he is exposed to during the term of employment to any third party. As the Employer has the right to own the Intellectual Property prepared and developed by the Employee during the term of the Agreement a clause related to ownership of Intellectual Property is also common in the Agreements.

Dispute Resolution

An Employment Agreement may include a clause relating to the resolution of disputes. Disputes can be resolved in several ways, and parties are free to choose any method. One of the popular methods is Arbitration, which is preferable over lengthy litigation. If the parties are clear about their dispute resolution, then there would be no conflicts upon the same later on.

Restrictive Covenants

The agreement may include restrictive covenants such as non-compete and non-solicitation clauses. It ensures that an Employee shall not join a competitor or start a business based on the same idea and solicit the organization’s other employees, clients, distributors or service providers to leave the organization and join him after terminating his employment with the Employer.