In Bhutan, the labor framework recognizes two primary types of employment agreements, each with distinct characteristics.

Contract of Employment (CDI - Contrat à Durée Indéterminée)

The key feature of this type of agreement is that it offers ongoing employment without a predetermined end date. The formalities of this contract can be oral or written, but a written contract is strongly recommended for clarity and outlining termination provisions. Written contracts are especially important for establishing details like job duties, salary, and benefits. Either party can terminate the contract with proper notice as outlined in the Labour Act (e.g., one month's notice for employees with over one year of service).

Fixed-Term Employment Contract (CDD - Contrat à Durée Déterminée)

This type of contract offers employment for a specified period or to complete a specific project. The formalities of this contract must be in writing. The Labour Act doesn't specify a maximum duration for these contracts. However, excessively long fixed-term contracts might be challenged in court if deemed an attempt to circumvent employee rights associated with permanent contracts.

Additional Considerations

Bhutan encourages vocational training through apprenticeship programs. These agreements, governed by specific regulations outlined in the Labour Act, combine on-the-job training with formal vocational education. While not explicitly mentioned in the Labour Act, part-time employment arrangements can be established through fixed-term contracts with reduced work hours.

Employment agreements in Bhutan serve as a foundation for the employer-employee relationship, outlining rights and obligations for both parties. A written agreement offers greater clarity and protection. Here's a breakdown of essential clauses to consider incorporating:

Core Contract Details

• Parties Involved: Clearly identify the employer and employee with their full names and contact information.
• Type of Contract: Specify whether it's an indefinite-term or fixed-term contract, and for fixed-term contracts, the duration and potential for renewal (if applicable).
• Position and Duties: Outline the employee's job title, a clear description of their responsibilities, and any supervisory hierarchy.

Compensation and Benefits

• Salary and Allowances: State the gross salary amount, payment frequency, and any additional allowances or bonuses offered.
• Working Hours: Specify the standard working hours per week or day, including any overtime arrangements and compensation if applicable.
• Leave Entitlements: Outline the employee's entitlement to paid vacation leave, sick leave, maternity leave, and other forms of leave.

Termination Clauses

• Notice Periods: Define the required notice period for termination by either party, adhering to the minimum legal requirements.
• Severance Pay: For indefinite-term contracts, specify any severance pay provisions that may be offered in case of termination initiated by the employer (unless for misconduct).

Additional Considerations (Optional)

• Confidentiality Clause: Can be included to protect sensitive company information the employee may access during their employment.
• Non-Compete Clause: While the enforceability of non-compete clauses in Bhutan is not entirely clear, it's advisable to proceed with caution. Drafting such clauses narrowly to protect legitimate business interests is recommended if included.

Probationary periods are a common feature in Bhutanese employment agreements, offering both employers and employees a chance to assess suitability during the initial phase of employment. Bhutan's Labour Act (2007) allows for probationary periods, but specific details are not explicitly outlined within the legislation.

Key Characteristics

• Legally Permissible: The Labour Act doesn't expressly prohibit probationary periods. Therefore, they are generally considered permissible by legal experts.

• Variable Duration: The Act itself doesn't prescribe a fixed duration for probation. However, the duration should be reasonable in proportion to the specific position and responsibilities of the employee.

• Transparency and Fairness: It's considered good practice to clearly define the probationary period within the written employment agreement. This fosters transparency and avoids misunderstandings.

Termination During Probation

• Reduced Notice Periods: During the probationary period, either the employer or the employee can terminate the employment with shorter notice periods compared to the standard termination terms outlined in the Labour Act. The specific reduced notice period can be established within the employment agreement.

• Fairness in Termination: Even during probation, termination should not be based on discriminatory or unlawful reasons.

Additional Considerations

• Confirmation of Employment: Upon successful completion of the probationary period, the employment relationship transitions into its full contractual terms as stipulated in the agreement.

• Probationary Period & Employee Rights: The probationary period should not disadvantage the employee's basic statutory rights established under the Labour Act, such as minimum wage or protection against unfair dismissal practices.

Bhutan's legal framework regarding confidentiality and non-compete clauses within employment agreements is still evolving. However, employers seeking to protect sensitive information and business interests can consider these clauses with careful attention.

Confidentiality Clauses

Confidentiality clauses are generally accepted and enforceable in Bhutan. These clauses restrict employees from disclosing confidential information belonging to the employer. This can encompass sensitive data such as customer lists, trade secrets, and proprietary formulas.

A crucial point to consider is the clarity of definition. The confidentiality clause should clearly define the specific types of information considered confidential. Vague definitions can weaken the enforceability of the clause. By clearly outlining what constitutes confidential information, employers can establish a stronger foundation for enforcing confidentiality agreements.

Non-Compete Clauses

The enforceability of non-compete clauses in Bhutan is less certain compared to confidentiality clauses. The Labour Act (2007) doesn't explicitly address non-compete clauses, and there's limited case law to establish clear guidelines.

Exercising caution is advisable due to potential conflict with employee rights. Bhutan's labor laws prioritize an employee's right to earn a living. A non-compete clause that excessively restricts an employee's ability to find future employment in their field might be deemed unreasonable and unenforceable by courts.

However, there might be some limited wiggle room. If an employer has a legitimate business need to protect highly sensitive information or prevent client poaching by a departing senior employee with crucial client relationships, a narrowly tailored non-compete clause for a reasonable period could be considered enforceable.

An important caveat is that consulting with legal counsel familiar with Bhutanese labor law is crucial when considering non-compete clauses. They can advise on the specific circumstances and draft a clause with the highest chance of enforceability, considering the evolving legal landscape.