Ukmitra
Business Development, Employee Relations,
Amitkishore
Corporate Legal Compliances
Cite Contribution
Community Manager
+1 Other

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Dear HR Friends,
I need to know how effective can the non-compete clause be in the appointment letter......are employees bound legally to obey and is it worthwhile to incorporate the clause in the appointment letter?????

From India, Thana
Yes, I feel, it should be, provided that such act by employee, would greatly impact your business.
Usually, non-compete clause need to follow with a "Time Limit" say example 2 years. You will also have to have an entire "write up on this policy". Usually non-compete is included as part of "Confidentiality and Non-Disclosure Agreement".
Especially, the Mobile marketing, VAS, media and online content companies, have this clause included in their offer letters and I have personally seen, such companies actually ensures that the same is adhered to in "letter and spirit", since the business impact due to such act by employees is very very huge.
Ukmitra
PS: Note that it finally it remains on the part of the employers responsibility to prove before governing body/court, non-comformity by an employee, signing such agreement has effeted their business, in case of any grievance.

From Saudi Arabia, Riyadh
Greetings,
The clause is essential as it prewires from future situations. Hence, protects the employer in case of any violation, if reported. However, the implementation remains the prerogative of the users to the system.
Please share, if you were asking this question as an employer or an employee ? If you are to design this system for your firm, you may consider sharing a little more .
Regards,
(Cite Contribution)

From India, Mumbai
As per Section 27 of the Indian Contract Act, 1872- Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

So inclusion of non-compete clause in the agreement may not be enforced in the court of the law.

Despite of this many companies are including such clause in the appointment letter.

Further, this kind of negative covenant is reasonable so far employee is in service (during service) but such condition is made applicable post-termination/resignation then it will be treated as restrain in trade/service under following laws:

section 27 of contract act and Article 19 of our constitution of India which give fundamental right to profess and business and occupation subject to law.

Refer -

In Pepsi Foods Ltd. & Others v. Bharat Coca-Cola Holdings Pvt. Ltd. and Ors. 1999 LLR 1027 (Del.) the enforceability of a negative covenant restraining employees from engaging or undertaking employment in other company has been treated as economic terrorism

Regards

Amit.

From India, Delhi
@ Amit Kishore,

You have touched a very important discussion by your post, which I wanted to avoid since it involves legality, and I being not a lawyer I am not the right person to comment.

However, here are some view of legal fratinity below, from my library chest, which I hope will be useful to all readers who have interest on the subject:

Quote

That not only all Indian courts have struck down non-compete clauses which completely restrains an employee after termination of employment but also struck down argument and the principal of partial restraint with respect to post-employment non-compete clause.

Having said that, Post-employment restrictive covenants are considered to be prima facie void, but it is important to note that one void clause in an agreement does not automatically render the entire agreement void and unenforceable. The remaining valid clauses may continue to be enforced.

Therefore, even though such negative covenants do not operate after the

termination of the contract and have been held void by the courts of India, it

is still common practice to include such covenants in an employment

agreement to serve as a deterrent.

Unquote

Based on above, company still include the clause, as we have seen few employees; post termination trade with the compannies secret like Programing code, research materials, Business margins with client, poaching high networth clients by illegal means etc, which I feel can be contested in court of law for grievance.

Hope to you hear from you and other Sr professional in the subject.

Ukmitra


From Saudi Arabia, Riyadh
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