Terms Employers Must Put in Writing in Employment Contracts

People always ask me why lawyers make huge contracts for something as simple as hiring an employee. Is it to justify the fees? No. Well, at least most of the time it isn’t. We try to ensure that employment contracts cover every possible scenario, so that there isn’t any ambiguity and any dispute between employer and employee can be resolved quickly and with the least amount of bitterness. Below are some terms you should get in writing from your employees. For new employees you can include these in the Appointment Letter or Employment Agreement and ask them to sign it to accept the terms. For existing employees you can just put these terms in the form of a letter addressed to the company and ask your staff to sign it.

1) Non-Disclosure / Confidentiality Clause: You might not be doing any work that exposes the employee to any proprietary information, but a confidentiality clause is still important to protect details such as details of clientele and pricing.

2) Reference to Handbook/Code of Conduct: If your company has any handbook or code of conduct that is required to be followed by employees, the same is not legally binding on the employee unless he has accepted it in some way. You must take it in writing from the employee that he has read the handbook and that he will abide by it.

3) Non-compete clause: This clause bars the employee from joining or starting a competing business during the employment and for a specified time frame after the employment. However, the Supreme Court has held that restriction on post-employment non-compete must be reasonable for it to be enforceable.

4) Non-solicitation clause: This clause prohibits the employee from poaching the clients and employees of the company after her/his employment.

5) Outside Activities Clause: It may seem obvious that a full-time employee shouldn't be moonlighting, but always put it in writing explicitly.

6) Penalty Clause: It's always worth spelling out what penalty the employee will face if they breach any of these clauses. However, the law on this is vast, and the courts may actually grant the employer an amount lesser than that mentioned in the agreement. But it’s a good clause to keep the employees on their toes.

7) Termination and Notice Period: There may be a fixed time for which the employee is not allowed to terminate the agreement. This clause usually comes in when the company is spending a lot on training the employee and it would not be feasible if he left the company within a few months of completing the training. Mention when termination is possible and what would be the notice period for the same (notice period must be reasonable). Also, mention that the employer can terminate at any time without assigning reasons. 

The above article is written by Vikrant Shetty of Taurus Legal.

Related reading

When Is a Payment to a Partner Profit and Not a Loan · How Are Force Majeure Clauses Interpreted in India? · Are Non-Compete Clauses in Employment Contracts Enforceable in India?

Vikrant D. Shetty | Vikrant D. Shetty leads the Employment Law Practice at Vikrant D. Shetty & Associates, Advocates & Solicitors. With Mumbai's workforce spanning large multinationals, financial institutions, startups, and professional services firms, employment contracts and workforce compliance are a recurring engagement for the firm. The firm advises employers and senior employees on the drafting and negotiation of employment agreements, advises on compliance with labour statutes including POSH, the Shops and Establishments Act, and applicable standing orders, and represents clients in employment disputes before the appropriate courts and labour forums.

Related reading: Are Non-Compete Clauses in Employment Contracts Enforceable in India?.

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified advocate.