Employment Bond

1. Concept

“Employment bond” – refers to a contractual stipulation requiring an employee to stay employed with the employer for a certain length of time, and it often comes with a penalty if the employment duration is not complied with.

2. Purpose of employment bond

The common purpose of an employment bond is to retain employees for a certain duration of time, particularly if they have been trained or have undergone professional development.

In some cases, an employment bond is a way for the employer to ensure that they can recover any associated costs in hiring an applicant, such as fees that may have been paid to recruiters or recruitment firms, training and professional development, and similar thereto.

3. Validity of employment bond

An employment bond is a contractual stipulation, whereby the employer and the employee freely stipulated and agreed to the employment terms and conditions, including the employment bond.

This follows the principle of autonomy, whereby parties are free to stipulate on the terms and conditions of their contract provided it is not contrary to law, morals, good customs, or public policy.

Related:

⦁ Principles of employment contracts

a. Law

There is currently no labor law nor regulation specifically regulating nor prohibiting employment bond. Thus, following the general principle of law that: what is not prohibited is allowed, employment bond stipulations are allowed as they are not prohibited.

1) On involuntary servitude

Having an employment bond does not amount to involuntary servitude.

The concept of involuntary servitude denotes that an individual is being required to render work against his freewill; otherwise stated, slavery. Often, the consequences for refusing to render work are cruel and inhumane punishment, and in some cases, even death. Slavery is outright prohibited by law in the Philippines.

These conditions are, however, not the same with individuals who have the freewill and freedom to sign employment contracts with an employment bond. These individuals have the option whether to proceed or not. If they sign, then they consented. If they do not agree to the employment bond, then they have as much freedom to look for employment elsewhere.

For those who are under an employment bond, they still have the freedom to continue with working or not – at the expense of being subjected to the penalty for breach of contract if they do not complete the employment duration stipulated in their employment contract/bond.

b. Morals

There are no morals that are violated with an employment bond stipulation. Whether one is “right” or “wrong” under the law, it has to be evaluated in a secular/non-religious way. As it stands, there is no public morality that is offended by an employer and an employee agreeing to an employment duration and providing for a penalty for non-compliance.

c. Good customs

Similar to morals, there is likewise no good customs that are violated relating to an employment bond. Nothing in the Filipino customs are offended or violated by parties stipulating on the length of their employment.

d. Public policy

In general, there is no public policy violated in case of an employment bond.

The exception thereto would be if the employment bind is patently unconscionable, such as requiring a minimum wage earner to stay for twenty (20) years with the Company and the penalty for non-compliance would result in paying more than ten (10) times the compensation.

While there is no hard-and-fast rule on matters of public policy, a good rule of thumb to note would be if it shocks the senses, or at the very least raises an eyebrow, more or less. At the end of the day, it is the courts which will decide whether one is contrary to public policy.