Is Action Possible Against Ex-employee For Creating Competition - CiteHR
Dinesh Divekar
Business Mentor, Consultant And Trainer
Saswatabanerjee
Partner - Risk Management
RedStarGroup
Consultant
Cite Contribution
Community Manager
Executor
Start Up Consultant
V. Balaji
Ir & Hr
Nalina.k
Trainer & Od Consultant

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Hi..
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A senior member of a start up leaves after 7 years with complete clearance and exit formalities. After 6 months he starts a new company, working more or less in the same sphere. There was a vague 2 year Non-compete clause in the appointment letter.
His ex bosses call him up and softly lets him know about their tracking this individual\'s work and suggests that he exercises caution in approaching former clients or the ex-companies core clients.
This guy had so far been clear about his intentions NOT to directly compete for projects; but now intends to challenge this bullying. he also enjoys the fact that the ex-company actually fears losing business to a one-man start-up thus showing their lack of confidence in their own abilities; and their concern about how much business this new start-up can take away leveragin
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Dear friend,

Situations of this kind of not so common. But these do happen. What is your product or service? You have not mentioned that.

A very prominent plywood company has a competitor in the form of their own ex-employee. Large number of small courier companies are owned by ex-couriers or managers working in courier companies. In Marathi there is a proverb "Kurhadicha danda, gotas kaal". At times it happens in business something of this kind.

Running business is not that easy. So far he has worked under the umbrage of MD. Now he does not have that protection. No employee can be master in operations, sales/marketing, etc. He could face myriad problems and he may have to shut down also. You may have to show patience till that time.

To avoid situations of this kind it is better to keep close eye on the employees who have entrepreneurial ambitions. But now the that time has gone.

A very prominent spice power making company from Kerala has large number of franchisees. Many of them are their ex-employees. Try exploring this option. If you make him your company's franchisee, then you will be able to protect your clients.

You are worrying about this person's ability to convert your clients. I doubt about it. Companies are tied to the products/services and not to persons. Possibly he may start selling his product or service with reduced price. But then no business has succeed in the long run by selling at low price. Classic example is Reliance Infocom. They started their mobile service with 40 Paisa per minute rate about a decade ago. Today they show debt of Rs 38,000 Crore (INR 380 billion) on their balance sheet.

As far as non-compete agreement is concerned, how far it will work I am doubtful. You may consult some lawyer on this.

Thanks,

Dinesh V Divekar
Dear Sir's,

An interesting question, i do not know if this case is legally punishable. Facts are more powerful in their existence though annoying.

But, the most important thing to know is there is nothing in business which cannot be competed. Also, most organizations which exist today are evolution's of the above case. There is always one person with some great /good idea to begin business and this was copied to multiply. This is HISTORY. Entrepreneurship is not a single man's forte. It has been true since the days of first business, dealing with a product or service. The competition can be on product ranges, expected needs, product packages, service needs, price, quality, markets etc., World is such a huge market for as many players it can hold.

In fact in one of my early days of training, an entrepreneur who was a trader turned manufacturer was worried about competition from one of his early employees who also became a trader in the same arena of business. This made him loose a considerable amount of business. This is where, one should make the employee turned trader, a competitor now as a franchisee or agent as Mr.Dinesh has rightly pointed.

This evolution is true and will keep happening. The important learning therefore is

1. Do not fear competition

2. Do not be scared of loosing the so called secrets of business such as market information, design etc.,

3. Do not waste your time worrying about people who might steal the secrets, because it is not easy becoming a successful entrepreneur.

Remember that you have been the pioneer and you have your own strengths.

4. Use all your time and energy in looking at the business proactively based on the consumer / market needs.

5. You are still the pioneer and do not loose your position to someone due to fear.

Thanks

Nalina.K

09952419530

Trainer & OD consultant


A good question, but please note one thing that anybody is free to start the business or any kind. Now you don't expect a person leaving a organisation and starting a business in the field in which he/ she is not expert in. Definetly an ex-employee can also have full right to become an enterprenaur and can start the business of his field.
So you cannot stop anybody. If he is pulling your customers than is your have to dig root cause in your organisation that you are not able to satisfy your customer and your customer plans to move to somebody else rather than finding fault in your ex-employee. This only means that your ex-employee is giving a better service or trying to give a better service.
There is virtually no law than one cannot start a competition and competition is a part of society to prove who is the best. There is nothing called monopoly in any business.
Thanks Dinesh, Nalina and Moiz. In different ways, all of you have helped answer a complex problem. Yes, from the former companies point of view - it is indeed pettiness and insecurity that is making them nervous about a start-up. Maybe they realize that there is potential in this break away to take away clients. From the enterpreneur's point of view - the insecurity among his ex-bosses is just an amusing irritation + an oblique proof of his confidence.
However, the legal position remains unanswered. Is he/his venture sue-able? I believe not, but some enterprises are simply vindictive for the sake of being vindictive. What is the best course to follow then?
Oh yes, by the way, I am talking for the new entrepreneur and not from the old one's desk :)
In case the ex employers are not pursuing legal options, it could be that the lawyers would have advised them that in this case the MRTP act could apply. No body can monopolise any business. And if the employee is smart enough, he could create documents of this bullying by recording telephone calls etc and invoke the unfair trade practices act. Its an open world. Anyone can do business anywhere. Recommend the movie Rocket Singh to the ex employers. They will then understand how business is built. Not by arm twisting.
In any business, competition has to be there. No one can restrcit or prevent someone to start business. Howver, as per business ethics, the newly emerged enterprenuer should not copy the product or design, that is all.
You have entire gamut of products ranging from Pressure Cooker, Umbrella, shoes, tooth paste, hotels and what not. A manager working with a realtor starts his own real estate business little later. You must be master of your own trade. Running or owing a business is not that easy. It requires high degree of skills and entrepreneurship. Money alone will not help.
Then why fear competition?
V. Balaji
Dear
In the cut throat competition you can not expect from someone to be so honest untill he is not paid to be honest for same. In other words he has full right to survive and to use his skills for his livelihood there is no bonded labour system now.
An agreement ( Non Disclosure Agreement) can work towards if it was executed between both parties wherein you have paid him amount for next two years not to start same work or to maintain confidentiality of Business.
The relationship comes to an end, if an employee leaves the organisation.
Thanks everyone. Appreciate your balanced responses. I guess I didn't mention it, the work here is in the Service segment and hence there obviously is no copyright infringement. In fact, the little horizontal growth the the previous company did achieve was for this new entrepreneur and I think he has every right touse his skills for himself rather than a pack of losers. What say?
Finally, a line to mention here. "When you run alone no one appreciate but when you run with others it is competition and every one appreciate who wins the race", without the competitor there is no competition, it is just a monopoly and you will never grow and develop in monopoly.
Competition makes us more smart, stronger and innovative but with unfair trade practice a business can't go far. Competition is always good for all.

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