Training Bond story of Jet airways

and Jan Peter

GROUP-3 SEC-F
UM16319 Arunima
Acharya
UM16337 Manali
Madhuchhanda
UM16338 Mrigank Hajela
UM16341 Neerja Jain
UM16357 Somdutta
Sengupta
UM16373 Aakash Gupta
 The Clauses

Mr. Jan Peter joined Jet Airways dated 30 th April 1998 and had to undergo training and technical / performance
examination within two attempts failing which his training would stand automatically terminated.

On successful completion of the training, he was to be kept on probation.

Mr. Jan Peter was also required to pay back the training cost of Rs. 15 lacs viz. Rs. 7.50 lacs through
deposit / Bank guarantee for a period of 7 years and balance Rs. 7.50 lacs was to be recovered in
installments from the salary.

Mr. Jan Peter was also required to execute an indemnity bond with two sureties for an amount of Rs. 7.50 lacs
agreeing to serve the company for the period of 7 years and he was not to accept employment similar in
nature, either full or part time with any other employer.

On resigning the employee will bear the entire cost of training and / or damages if any;
 The Clauses

Refundable Demand Draft- to be retained for 7 years without interest 2.5 Lakhs

The termination clause in the appointment letter provided that the company would be entitled to terminate the
services of the employee without assigning any reason , by giving three month notice in writing or by payment
of three months salary in lieu of such notice

But if the employee desires to leave the services at any time after confirmation was required to give three
month notice in writing and the company however, at its sole discretion could waive such notice.

The employee left the services because of the change in conditions of service of Jet Airways Reduction in
Flight Duty Allowance and amendment to the seniority rules.

Jet Airways sought for permanent injunction restraining the defendant taking up any similar job including
sahara airlines and also demanded a sum of Rs. 6,94,000/- together with interest.

On resigning the employee will bear the entire cost of training and / or damages if any;
 There are three sides to
Employment Relations

Your
Their
Side The
Side
Law
Is Jan Peters resignation from Jet Airways a breach of contract ?

Companys perspective : If we read the agreement, the answer is yes.

Nonfulfillment of 3 months notice period
Joining another airline and performing similar duties

Jan Peters perspective : No.

Alteration of clauses - Flight Duty Allowance and Seniority
roles by Jet Airways

Courts perspective
 What did the court say?

Court observed that in case of resignation or leaving the services, the defendant
had to pay to the company on pro rata cost in respect of training.

Further, the court observed that the training has been received by the defendant
at his own expense. Thus the company had no proprietary rights in the
intellectual property rights which flow form the training .
The Court finally held that no injunction could be granted which would prevent
the defendant from exercising his proprietary rights.

The terms & conditions in the agreement were highly skewed towards the
employer.
Should Jan Peter be allowed to fly 737 300/400/500 series
aircrafts at competitor airlines such as Sahara Airlines? ---------
YES
Clause Restraint from trade i.e. seeking similar job elsewhere

The Delhi High Court said - Rights of an employee to seek and search for better employment
cannot be restricted by an injunction.

An injunction can be granted only for protecting the rights of the employer, but cannot be
granted to limit the legal rights of the employee;

Rough and tumble of the business including stiff competition has to be faced in a free market
economy. The problems which should be settled in the market place cannot be brought to law
courts or settled by a court injunction.
It is an accepted fact that the terms and conditions of service of the Jan Peter have been
unilaterally altered by the Jet Airways.
Do you think that Jet Airways claim to seek compensation of Rs.694000
with interest rate at 24% per year from Jan Peter is justified?

COMPAN
YS Justified
PERSPEC Compensation for all the losses suffered like loss of 8 pilots,
TIVE four months of time and money invested on training

Jan Peters has already paid a total of Rs. 13.3 lakhs in form of
JAN Guarantee money, monthly salary deductions and indemnity
PETERS bonds while the total expense incurred was Rs. 11,31,400.
He cannot be held responsible for other losses.
PERSPEC
Loss of time and money- Both have been compensated by Jan.
TIVE
And also it is similar to taking training in some aviation academy.

Jan Peter will not pay any more compensation as he has already
paid the expense incurred for his training
The court considered the training bond as one sided and
COURT
unreasonable
VERDICT Loss of 8 pilots was a temporary situation and the company was to
be held responsible for its breach of contact. In addition to that 16
pilots had left Sahara Airlines to join Jet Airways.
PUBLIC INTEREST IN CONTRACT ENFORCEMENT

What Requested enforcement of contract through an injunction

Jet Jan Peter could fly other kinds of planes and not work for
competitor providing them an advantage
Airway Claims that non-enforcement will send out wrong signal to airline

s industry
Airlines would cut corners in training the pilots in the
Claime apprehension of losing trained pilots

d?

Jet Airways had no altruistic intention rather it was aimed at

profit maximization
Our company had no proprietary rights in the intellectual
property rights which flow form the training
Opinion Jan Peters career and family life would be ruined

? Jet Airways was keen to protect the tremendous investment

made in training
no public interest but mere commercial interest
 IMPACT OF ENFORCEMENT OF
CONTRACT NEGATIVES
POSITIVES
It will send a negative message to the
public as the contract does not protect
the proprietary rights of the pilots.

Employers will make This would also lead to tarnishing of

more investment in companys brand in the market as a non-
the human capital of employee friendly workplace.
their workers like Freedom of employees for improving their
training programs. future prospects and service conditions
by changing their employment will be
restricted.

It will help to protect the Employees will lose their right of inter
intellectual property of changeability of service
firms more than patent
and trade secret Firms cannot indulge in free, fair and
protection. This uninterrupted competition and it will
encourages firm entry directly suppress cluster development.
and creation of
intellectual property. Will deter workers from founding
spin offs.
IMPACT OF NON ENFORCEMENT OF CONTRACT

It will spread a
Airlines will promote
positive word about
stable and friendly
the transparent
working
working conditions
environment for its
in Indian Airlines
employees.
Industry.
 Conclusion Our Perspective

Negative covenants should not be skewed towards the benefits of the employer
Breach of
Contract?
Alteration of clauses should be consulted with the employee

Employees growth opportunity should also be taken into account

Restraint The negative covenant should not be in restraint of trade, being unreasonable
of Trade? and unconscionable.

Compensat Company can claim justified losses towards the sudden resignation
ion

Maintenance of free market economy and perfect competition should be kept into
Free
Market
account while framing the employee contract