Mumbai: Reliance Industries Ltd (RIL), India’s largest private sector company, has put in place some stringent measures to retain more than 500 top-notch engineers deputed by it to the overseas offices of its vendor Bechtel, a $20.5 billion US-headquartered engineering, procurement and construction firm.
The company has said engineers quitting before its mega refinery at Jamnagar in Gujarat is commissioned will have to reimburse their entire salary and incidental expenses incurred by RIL in sending them abroad. The company also requires these engineers to pay the base amount as well as an interest of 12% per annum on their salary and expenses as damages for quitting before the 2008 completion of the refinery. The period to be taken into account for calculating these damages is from the time the employee is sent overseas till the date of completion of the project.
Reliance currently has 7,500 engineers working on the 27-million-tonne-per-annum Jamnagar export refinery project. A spokesperson for the company declined to comment on the issue.
RIL has also barred its employees from joining any company where the knowledge, data and exposure from their overseas stint can be used in any capacity.
Vipul Prakash, partner at the Delhi-based Elixir Web Solutions, a human resource consultancy, said while it was not “common practice for companies to ask employees for reimbursement in case of overseas tours”, several did have non-compete clauses in their contracts with employees “to safeguard the company’s secrets.”
With its team of engineers begining to receive offers from rivals, RIL modified a key section on “employee committment” in an original document listing terms and conditions related to overseas assignments. The original document was issued in December 2005 and the modification was made in October 2006.
Lawyers Mint spoke to are divided over the enforceability of the new clause inserted into employee contacts by Reliance late last year.
“The courts have given judgements for enforcing similar contracts for payment of expenses involved in training employees to enhance their skills. However, under Section 27 of the Indian Contract Act, 1872, contracts in restraint of trade are not enforceable,” said Anoop Narayanan, partner, Majmudar & Co.
That means that a citizen of India cannot be prevented from carrying on a lawful trade or vocation. “No one can prevent an employee from using her skill sets in a job elsewhere (other than where they were learnt/refined) or else there would be no progress,” added Narayanan.
“To be held void, the contract must be proven to be unconscionable (an unfair bargain) and entered into ‘in terrorem’ (signed by way of force). However, if the employer proves that the contract was entered into with due consent of either party and understanding of the same, then the contract may be held to be valid,” said Debanjan Mandal, partner, Fox & Mandal, one of India’s largest law firms.
According to him, the amount to be reimbursed by the leaving employee would have to be decided on a case-to-case basis by the courts.
RIL can ask employees who want to leave to pay the damages as laid out in its policy. It can also refuse to issue relieving letters to those employees who do not pay the damages and take them to court. It isn’t known whether the company has done any of these in cases where employees chose to leave it.
Dadi B. Engineer, senior partner, Crawford Bayley and Co., said any dispute arising out of the contract terms would have to be adjudicated by the courts, a process that, in his assessment, could take 10-15 years.
“Courts normally do not issue injunctions for such cases. The court may also award reasonable damages to the employer if the contract terms are clear and the employee is in breach,” he added.
Globally, refinery projects have been delayed by between two and four years on an average, due to the unavailability of adequate amount of resources including skilled manpower. Engineers with expertise in completing mammoth, complex refineries in a record time of 27 months (almost half the global average time) as Reliance hopes to would be prized by a number of such project owners as a result, say experts.
By keeping the prized engineers in its fold RIL can draw on in-house expertise for implementing projects such as a proposed $3 billion petrochemicals plant at Jamnagar and a cross-country gas pipeline. The export-oriented refinery, which is located in a special economic zone in Jamnagar, is almost 50% complete with “basic engineering” done while “detailed engineering” work has seen 80% completion, according to RIL.
Delays in completion of competing refineries in Asia and elsewhere have allowed Reliance to earn a gross refining margin of $13 per barrel of crude in the quarter ended March 2007. As a result, RIL’s revenues from the refining business rose 21% year on year in 2006-07 to Rs86,009 crore. The gross refining margin is the profit earned by an oil refinery on converting every barrel of crude oil into petrol, diesel, liquefied petroleum gas and other products.