Is My Mid-Job Non-Compete Clause Legal? Seeking Urgent Advice on Employment Dilemma

Hi, I am writing here as well as under a reply to a post by a fellow facing a similar problem. He had no responses, hence I am also starting a new thread in hopes that those of you with the legal know-how will be able to hear my plea and advise me promptly.

I have just had a job change and am looking for advice regarding the same issue.

I was with an MNC for one year. I was not given any non-compete clause by that employer at the time that I signed my job contract. In fact, it was not mentioned at the time when negotiations were underway before my joining. I found the job favorable and hence submitted my resignation to the company I was with before that. This all happened in June of 2007.

Upon joining the new company, I worked contentedly up until September when they suddenly presented a non-compete clause document (not on stamp paper, not on the company letterhead) and told us to sign. What could we do but sign?

I have finally left that job now in July this year (2008) after one year of faithful and hard-working service. That company is threatening to sue me for joining a competitor.

Can someone please clarify if that non-compete has any legal standing at all? I reiterate, they did not inform me of a non-compete clause at the time of negotiations, nor at the signing of my job contract, and asked me to sign it mid-term of my employment.

Is this not signing under duress?

Please write to me as soon as possible. I am very worried and do not know if I should withdraw from my current employment or not. As far as I can tell, the whole situation is very dirty as they do not offer me any recompense for not joining a competitor. Where am I to work if not for a competitor? No other market would find me worth taking on regarding my experience in my current work experience.

Please see the zip file attached.

Thanks

Mumbai Dude

I have gone through your case and noted the issue in the subject matter. Any clause imposed by an employer that violates the articles under the Constitution of India and goes against the principles of natural justice is not tenable and cannot stand before the courts.

According to your version, at the time of your joining, the employer did not include the non-compete clause in your contract agreement. After you joined their service and worked for some months, how can they insist that you sign on a white paper by incorporating the said clause which is the subject matter under reference?

What I feel is that they want to get a signature from you on a white paper containing the non-compete clause and then attach that paper to your service contract by stating that you have further agreed to an amendment made to your service contract for the incorporation of the said new clause.

Even if you signed on the white paper under the forceful attitude and coercion of your employer, you need not worry about it since it is violative of the principles of natural justice. The Supreme Court also held in one of its judgments that any negative covenant contained in any agreement that restrains an employee from joining a new employer is not tenable and is violative of the articles of the Constitution of India. I have recently seen this judgment of the Supreme Court.

For the reasons stated above, you need not worry about the threats from your employer, and you can face them without any fear in the light of the judgment of the apex court. What I feel is that the non-compete clause also falls under the negative covenant as defined by the SC, and your case will also squarely apply and cover the judgment of the SC.

N.V. Rao
Hyderabad

Dear Sir,

I wish to thank you very warmly for your response to my query. I feel more confident now and will, as you said "face them without fear".

Thanks once again.

I have received another email from HR, and they have brought to my attention the mention of a Non-Compete Agreement in my Appointment Letter. Because of this, by reference, it seems that I did sign their Non-Compete Agreement.

As it stands today, they have withheld my Full & Final Settlement payment amounting to Rs. 50,000+ and have declared that they have recovered losses sustained by them due to my joining a competitor. I quote from their email to me:

*Quote*
(v) That the violation of "employment contract" by you has caused loss and damage to the Company. The complete and full extent of the damages suffered by the Company is still under assessment.

(vi) That in view of the loss suffered by the Company on account of your illegal action, the Company has decided to recover its losses from the payments payable to you.

(vii) That, therefore, after making adjustments, no amount is due and payable to you by the Company.

(viii) That partial recovery of losses by the Company is without prejudice to its other rights and contentions, including the right to recover full losses suffered by it, as and when the full and complete extent of losses is ascertained, in appropriate legal proceedings."
*End Quote*

Now what do I do? Is it legal for them to just refuse to pay me my F&F without having gone through a court??? I am in desperate need of that money for various family obligations (ill parents et al.).

I have come to the point where I feel I should sue them. I would like to litigate against them for 1) Withholding lawfully earned salaries 2) Delaying payment and causing financial distress and 3) Mental harassment over the span of a full 4 months.

Can you help me on this matter? It is really very urgent!

Dear,

Without seeing the full text of the Non-compete Clause, sound legal advice is not possible. In your case, they have already initiated action. Firstly, you must defend their action and then make a counterclaim. It looks like you need local specialist legal advice. Please go for it without loss of time.

With Regards,

Email: rajanassociates@eth.net