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This article has been written by Prakash Kasbe, pursuing the Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho. This article has been edited by Ruchika Mohapatra (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).

Introduction

Food is an intrinsic part of a person’s life. Gone are the days when human beings only survived to gather food and live. Food and hotel industry the world over flourished with the growth of tourism, rapid traveling facilities, and growth of the international food industry through various restaurant chains spreading worldwide. Restaurants have acquired the greatest space in the world in terms of great cuisines.

The world has changed rapidly with the advancement of technology and so have restaurants. Restaurants are not just eateries anymore. Now the restaurants have become the place to explore the food quality, the ambiance of the restaurant, brand, and mainly the services offered by the restaurant. The culture of good food has changed the space of hotels and restaurants, wherein they provide the best services to their consumers in order to achieve maximum growth in terms of business revenues.

Resultantly, this has led the restaurants to hire the best quality of food professionals like chefs/cooks, managers, and other staff to provide unmatched quality of services to their consumers. The restaurants and food chains require skilled manpower with demonstrated skills or they hire people and train them with great investment and enthusiasm to achieve the results. This puts two-fold responsibility on the restaurants – one is to hire skilled people and the other is to train people to give their best efforts in the restaurant business. Worldwide, the hotel and restaurant business is growing constantly and this requires the businesses to hire the most qualified people for the same. 

Importance of employment agreement in restaurants

Therefore, the employment agreements have become a new normal as there is a rapid change in the restaurant industry’s competition rate with the entering of new restaurants day-by-day in the field. Generally, it is the tendency of the employees to switch their jobs frequently in the restaurants/ hotels which requires the balance in the employment. This has resulted in the practice of offering employment to people as per their expertise and has made it all the more important to reduce the terms of employment into writing agreements/contracts to bind the parties legally. Employment agreements are important for both the employer and the employees because they put employment terms in writing, which can be referenced at a later time if a dispute arises in respect of the employment.

Many corporations have entered into the restaurant business and started their own chains/brands of restaurants that required expert chefs, cooks, bar managers, and other staff. To ensure that terms are upheld, many restaurants and hotels have mandated entering into agreements with their employees. As a restaurant or its owner or corporate in the restaurant business, hiring can be a complicated but necessary task. Not only do you need to find reliable personnel but you also need to make sure they are properly trained to be food service personnel. This article will guide you through key areas and go through the important clauses of the restaurant employee agreement.

What is an employment agreement?

The employment agreement is a contract between two parties, employer and employee, that lays down the terms of employment, agreed upon by the employer and employee. This agreement governs the relations between them and sets out the broad terms of employment, work hours, wages/compensation/ salary, etc. which binds both the parties and provides the mechanism to define roles of both the parties to the agreement/contract. This agreement casts an obligation, upon the employer and employee, to respect and observe the terms of the agreement mutually. 

What is a restaurant employment agreement?

A restaurant employment agreement, as the name suggests, is the agreement in relation to employment in restaurants. The restaurant employment agreement governs the relations between the restaurant owner/employer and the restaurant employee/staff on the terms and conditions settled between the parties. Similar to other employment agreements, the restaurant employment agreement differs from the standard clauses as to the role and duties of the employee as they are specific to the work of the restaurant.

What are the types of restaurant employment agreements?

Below mentioned are some types of restaurant employment agreements for the general understanding of the readers.

Contract-at-will

This is a  popular form of employment agreement in the United States of America (U.S.A). In this contract, the employer can fire the employee at his will means by assigning a valid reason. This puts the employer in a demanding position as to the employee.

Fixed term contract

These contracts are used by restaurant owners in the United Kingdom (U.K), to provide employment in restaurants for a predetermined period. The restaurants can use this contract to fill in the replacement of an employee who is on leave for some reason.

Independent contractor contract

The independent contractors are also known as freelancers, are contractors, or consultants, who are self-employed workers/staff and technically not considered regular employees of the restaurant. While a restaurant typically wouldn’t hire traditional roles (cook, server, manager, etc.) as independent contractors, they may hire a social media manager or graphic designer in this capacity. Today, however, the hiring of independent contractors is on the rise globally. 

What are the essential elements/clauses of the restaurant employment agreement?

 Like any employment agreement, restaurant employment comes with mutual terms and conditions and predefined roles of the parties to it. Below are the essential clauses in this agreement which the parties will negotiate and agree upon. These are just general clauses that can be varied as per the job specification, employer-specific expectations from the employees.

1. The parties

This clause defines the parties to the Agreement, one should be the restaurant owner/employer and the other is the employee.

2. Position/role/status and job title

This clause varies with the position or role of the employee as the nature of work requires in the restaurant. There can be a position of chef, bar manager, restaurant manager, waiter, kitchen assistant etc. Restaurants may require many different types of employees. Some may be full-time, salaried employees; some may be part-time, hourly employees; and some may be more casual, on-call employees, etc. Therefore, it becomes necessary to define the position and/or role of the employee in the agreement.

3. Term/tenure

This clause specifies the duration of the employment. It can be permanent, temporary, short duration, full-time, Part-time, etc., and depends upon the employer.

4. Duties of the employee

This clause defines the duties of the employee, the tasks to be performed while in employment.

5. Effective date of employment : joining of the work

This clause talks about the joining formalities of the employee to the restaurant.

6. Place of work 

Mostly, the big restaurant chains implement this clause if there are more than one restaurant in any geographical area/location and the employer can transfer the employees to other places of work. It can also be strict in the sense that once the employee has joined, he cannot be transferred to other places.

7. Hours of work 

This clause defines the work hours of the employee in the restaurant. Generally, all countries follow the 8 (eight hours) work schedule.

8. Remuneration/compensation/wages and other benefits 

This clause is most negotiated upon in any employment agreement and can vary as per the industry standards.

9. Holidays and leave policies

This clause defines the nature of the holiday and leaves policies, this could be changed from employer to employer and according to the style of work adopted by the restaurants.

10. Training 

Training is a necessary element of this type of agreement because the restaurants invest heavily in training their employees. This, again, varies from one employer to another. 

11. Dress code 

Most restaurants have defined dress code policies for their employees. This adds value to their business and is observed in every restaurant. The employee needs to adhere to their policies as set out in their respective agreements.

12. Confidentiality 

This clause defines confidentiality in the restaurant business and the employees are strictly required to observe these. A non-disclosure clause in the same agreement would also prevent the former employee from sharing the restaurant’s secrets and ideas with their new employer

13. Grievance procedure 

In this clause, the restaurant can define the procedure to be adhered to in respect of the grievance of the employees and the remedies, therefore.

14. Disciplinary procedure 

This clause specifies the procedures in respect of the disciplinary actions and procedures adopted by the employer.

15. Amendment

This clause specifies the manner of amending the agreement, terms, and conditions of employment and other incidental matters.

16. Indemnity 

This clause details the obligation of the employee to indemnify the employer for his actions and deeds in case of any dispute arises.

17. Severability 

This clause defines that in the event any of the covenant, term, or condition is declared void by a competent court, then such covenant, term, or condition shall be severable and all other binding terms shall continue to have the effect they did prior to such severability.

18. Governing law and jurisdiction 

This clause of the restaurant employment agreement provides the provisions for the law applicable and the competency of the courts to entertain the dispute arising out of such agreement.

19. Non-compete, non-solicitation clause

These are the standard clauses that can be included in the agreement for the protection of the business and can be varied from employer to employer. These clauses put an obligation on the employee to adhere to confidentiality and other aspects. In the restaurant employment agreement, a non-compete clause would prevent a manager or executive from leaving the restaurant to work for a competitor.

20. Intellectual property rights

This clause comes into the picture when there is any specified intellectual property associated with the restaurant, its brand, etc. The employees are required to protect the intellectual property of the restaurant.

21. Notice

This clause defines the addresses of the employer and employee for serving the notices for communication and also specifies the manner in which the service of notice can be construed as valid service. 

22. Termination

This clause prescribes the mode of termination of the employment agreement, the effects of the termination, etc.

Law relating to the restaurant employment agreement in India

The provisions of the Indian Contract Act, 1872, and the Indian labour laws govern the employment contract. The restaurant employment agreement as like any other contract is also based on an offer, acceptance, consideration, competent parties, legal object, and free consent. The parties to the agreement take recourse to the provisions of the contract law.

As a matter of practice, an employer and the proposed employee sign a letter of appointment prior to the signing of a formal employment contract. A prelude to a formal employment contract, a letter of appointment is generally signed to cover the period of probation unless a person employed is confirmed by the employer.

Issues in relation to the restaurant employment agreement

Various issues like termination of an employee by the restaurant/employer, the resignation of an employee without serving notice period, failure to return from leave, failure to report to work without notice, layoffs, disciplinary actions, unsatisfactory work of an employee may occur in the restaurant employment. The restaurant employment agreement shall come into the help of both parties in case of a dispute.

Ruling of courts in India

In the matter of Percept D’Mark (India) Pvt. Ltd. v. Zaheer Khan & Anr, it was held that Section 27 of the Contract Act (a) if a restrictive covenant extending beyond the term of the contract is void and not enforceable and (b) the doctrine of restraint of trade does not apply during the continuance of the contract for employment and it applies only when the contract comes to an end. Somewhere there must be a line between those contracts which are in restraint of trade and whose reasonableness can, therefore, be considered by the courts, and those contracts which merely regulate the normal commercial relations between the parties and are, therefore, free from doctrine.

Conclusion

Article 21 of the Constitution of India guarantees the right to livelihood which is considered as the most valuable right and the restriction upon the same is considered as the violation of such right. The restrictive covenants and terms in the employment agreements should be reasonable and the Courts have kept checks on such violations of the rights of the employees. The employers and employees are required to follow the terms of the contract so as to avoid any type of disputes in matters of employment. Therefore, it’s important to draft the restaurant employment agreement in a reasonable way to pass the tests of Courts and it should balance the interest of both parties to it.

References


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