Is It Legal to Join a Competitor or Client Company After Leaving Your Job?

Hi All,

I want to know, is joining a competitor's company or a client's company illegal? I have observed in both of my previous companies' offer letters that they have included a clause stating that an employee should not join their competitors immediately after leaving their current job. Additionally, please clarify if it is illegal to join a client company and what legal implications arise if an employee joins a client of their current company only.

Regards,
Jayasheela

Hi Jayasheel,

Actually, this kind of clause is designed to prevent the leakage of valuable information to competitors. I am working with a consultancy that also includes a similar clause. It is not illegal; rather, it is implemented for the company's self-interest.

Seniors, please comment.

Hi Jaishi,

Please refer to your Employment Contract or Employee Handbook. For confidentiality, there's usually a policy that stipulates staff are not allowed to work for competitors and/or clients within a specific period of time. If such a policy is in place, resigned staff should be obliged to avoid getting into a legal tussle.

Personally, whether such a policy is in place or not, it is how the whole employer-employee relationship is managed that leads to the termination of service. I have seen many different practices:

1. Policy in place. Staff resigned, gave 1 month notice, and at the same time informed that she was joining a competitor. Her resignation was accepted with immediate effect. The company paid her salary-in-lieu, and she did not need to serve the 1-month notice.

2. Same situation, but the staff was allowed to serve the 1-month notice because this particular staff is well-known to be a righteous and professional person.

Regards,

Autumn Jane

A condition that is accepted while joining the organization is equal to a condition of agreement, so it should be followed. Even some offer letters meant for higher-level managers state that none of their close relatives should work for competitors or clients without permission from the employers. These conditions are not illegal.

How can we avoid an employee joining competitors if a person is quitting the job and joining somewhere? In most cases, the profile matches perfectly with competitors only. If I am not wrong, we find many practical cases of senior-level people shifting from one company to another in the same industry. In that case, changing the job should be restricted only to a different industry, not within the same industry.

Regards,
Jai

Such clauses like "do not join competitors" or "there is a bond for 2 years, else there will be a penalty, etc." are illegal. Such unilateral clauses are void ab initio.

Yes, if your job agreement or contract gives you any benefit in lieu of not joining competitors or not leaving before 2 years, etc., then it may have legal value. By definition, any valid contract has to have an offer, an acceptance of the offer, and a consideration for acceptance.

So, I beg to differ from the opinion of Parsurampur - a condition that is accepted while joining the organization is equal to a condition of agreement. So it should be followed.

Therefore, if you have the guts and any competitor who values your guts and wants to pay you handsomely, join immediately.