Clauses and validity of the Service agreement


During the duration of the employment relationship, the employment agreement establishes the rights and obligations of both the employer and the employee. Everyone is an employee, from the lowest level to the CEO, and a master service agreement is necessary to strategize and systematize employment. For employees, it clarifies the wage scale, motivation, vacation, working hours, job roles and much more. The only legal instrument of an employee that can help him protect his rights as an employee is an employment agreement. An employment contract can help an employer simplify its workforce. This agreement serves as evidence in the event of a dispute and as a source of legality that both parties must adhere to.

Conclusion of an employment contract?

The employment agreement must be signed in two copies, one for the employer and the other for the employee.

Can an employment contract be enforced in India?

The Indian Contract Act does not mention a contract of employment. However, it is allowed in India as long as it does not impose any unreasonable restrictions on the employee. Under Section 27 of the Indian Contract Act, an agreement in restraint of trade is void only to the extent that it restrains trade. As a result, there is no absolute limit and it should only apply to partial limits. The employer has the exclusive right to the services of the employee for the duration of the employment relationship.

What are the main terms and conditions of the employment contract?

We have compiled a list of the most important phrases and terms that should be part of the contract. Although this list is comprehensive, an employer or organization can always add additional conditions to protect their employer's interests.

      Contracting parties – the employer and the employee are the contracting parties to the agreement and both must sign it. 

      Place of work - The place where the employee will work should be specified in the agreement. 

      Effective Date – The Effective Date is the date on which the Agreement becomes effective; in this case, the employee's start date is used as the effective date. 

      Hours of Work and Hours of Work – The agreement should specifically state hours of work and hours of work. 

      Job Description – The agreement should include the key responsibilities the employee will be responsible for as well as the job description that was included in the offer letter provided to the employee. Details of the department the employee will be working in should be included as well as information about their supervisor/reporting manager. 

      Legal Policy - Details of public holidays and paid leave to which an employee is entitled within a year should be included in the leave policy. 

      Trial period - a trial period can be arranged when starting a job. The probationary period may not exceed six months. In the case of fixed-term employment, the trial period may not be longer than half of the duration of the contract. Throughout this period, employees are paid regular wages. 

      Remuneration – the gross salary offered to the employee must be stated in the agreement. Any deductions from wages such as taxes, insurance, etc. must be specified in the contract. Both parties must agree on the reward payment mechanism. 

      Notice period – The notice period must be given to both the employer and the employee. Neither party should be entitled to terminate the contract without cause, and the non-terminating party should be entitled to compensation if the contract is terminated without cause. 

      Arbitration - To avoid ambiguity in the event of a dispute arising out of this employment contract or the employment relationship generally, the parties should indicate whether or not they will first resort to arbitration. Both parties must agree to reach an acceptable solution, which can be achieved through the use of a well-structured arbitration clause 

      Duration - Every agreement, including employment agreements, must have a deadline. Employers as a whole adhere to fixed deadlines for their employees. Most of the time it is for a year, although it can be renewed. 

      Termination – both parties have the right to terminate the contract. The reasons for terminating the contract should be clearly stated. 

      Confidentiality and Confidentiality – No employer or organization wants their sensitive information, such as trade secrets, financial information or client information, to be shared with the public or competitors. In order to prevent the employee from disclosing information, the service contract should contain a confidentiality and non-disclosure clause. Separate nondisclosure agreements may be signed by executives or employees who are exposed to the organization's sensitive information. 

      Intellectual Property Rights - Every company invests a lot of time and money in training their employees, as a result of which they produce a lot of valuable business data. This information is the intellectual property of the organization and should not be misused by anyone. To avoid this, the agreement should include a clause that says any intellectual property developed on the employer's premises or using the employer's infrastructure belongs to the employer. 

      Jurisdiction – By including a jurisdiction clause in the contract, the parties can expressly determine which court or forum will have jurisdiction to decide any legal disputes between the employer and the employee arising out of the employment contract. The applicable law clause in the employment contract specifies the preferred legal system of the parties. Labor laws vary from state to state, so it's a good idea to specify a set of control rules in the contract. 

      Non-competition agreement - For the period specified in the clause, the employee is prohibited from establishing a similar business or joining another organization with a similar activity to that of the employer.

Is there any law that regulates employment?

The relevant Trades and Establishments Act regulates employment practices such as vacation, maternity leave, working hours and so on. Factories Act 1948, Maternity Benefit Act 1961, Payment of Gratuity Act 1972 and other related Acts regulate many elements of employment.

Is it necessary to have the employment agreement notarized?

Although the employment agreement does not have to be notarized, stamp duty must be paid for it. Since stamp duty rates vary from state to state, they can be found in the price list of the applicable Stamp Act.

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