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Home / Education / Understanding your rights: The Legality of Employment Contracts

Understanding your rights: The Legality of Employment Contracts

The private sector is governed mostly by contract law thus providing less scope for judicial intervention by Courts to enforce the rights of employees in this sector.

education Updated: Oct 01, 2019, 17:15 IST
Malavika Rajkumar
Malavika Rajkumar
It is good practice for any potential employee to personally conduct market research before applying for a job.
It is good practice for any potential employee to personally conduct market research before applying for a job.(Sanchit Khanna/HT PHOTO)

The relationship between an employer and an employee comes from a mutual understanding that is cemented in a legal instrument i.e. a contract. In addition to contract law, the public sector is mostly regulated by labour and industrial laws, leading to the protection of the rights of employees. Whereas, the private sector is governed mostly by contract law thus providing less scope for judicial intervention by Courts to enforce the rights of employees in this sector.

Since, the private sector remains mostly unregulated the legal duty of the employer to guarantee the rights of a professional is less stringent than a salaried employee in the public sector. In most scenarios, employment contracts are an exposition of heavy and inscrutable legal jargon, which inevitably confuses the reader. This increases the importance for people involved in the private sector to understand the nature of the employment contracts and to read them before signing it.

Do Market Research

It is good practice for any potential employee or professional to personally conduct market research before applying for and accepting a job offer. Through market research, the candidate can assess the company or firm he or she wishes to join and understand the quality of work, work culture, timings, industry standards of remuneration, potential for professional growth etc.

In many scenarios, not doing market research negatively affects negotiation capabilities of the candidate with the employer, especially while asserting requirements or while increasing salary or retainer fees.

Have a Written Contract

If the job offer and acceptance have been made verbally, the employer has the prerogative to withdraw the offer. Despite oral contracts being recognized as binding under contract law (Indian Contract Act, 1872), it is prudent to document the offer and acceptance, as an oral contract is hard to prove in a court of law.

Highlights of a Contract

Though employment contracts have multiple terms and conditions in it, the highlight/crux of the contract is the identification details of the employee, job duration, the job position, and the salary or retainer fees. Even a small typing error in the contract may negatively affect the rights of the employee in the long run, thus making it important to read every term of the contract before signing it.

Before signing, conducting research on the terms of a contract becomes useful in situations where legally prescribed rights may be excluded or illegal terms may be included. For example, a contract should not exclude legally mandated benefits like maternity leaves under the Maternity Benefit Act, 1961 or may include illegal restrictive terms such as asking an employee not to practice with a rival firm after quitting etc.

Compliance with HR Policy

Sometimes, the contract may make references to and may direct a person to the Human Resource Policy (HR Policy) of the organization. The HR Policy is a set of guidelines prescribed for employees and employers working in an organization. Non-compliance with the HR policy may lead to disputes with the employer, and may even result in termination. Learning

such policies, which are outsourced from the employment contract, would give one more insight into how the organization functions.

Read Your Contract

Employment contracts holds one legally accountable for one’s work and is the framework of rights which an employer can guarantee. The importance of reading and only then signing such a document, cannot be overemphasized, as changing the terms of the employment contract is hard, once you sign it. Further, if you violate any of the terms, you may be caught up in litigation or other dispute resolution methods, prescribed in the contract itself, which would severely affect your job prospects in the future as well as cost you time and money.

Employee awareness on understanding the legal and organizational process is essential before signing any contract. Once a contract has been signed, an exit from the company can only be in the manner given in the employment contract. Therefore, it is advisable and in the interest of an employee or professional to read all terms and conditions of the contract and understand each one of them, before putting pen to paper.

(Author Malavika Rajkumar is a Legal Content Analyst at Nyaaya, an initiative of Vidhi Centre for Legal Policy, New Delhi.Views expressed here are personal.)

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