Can My Former Employer Legally Withhold My Final Settlement for Joining a Competitor?

Hi All,

I have been reading some of the queries posted in this forum and the fantastic guidance given by all the participating members.

I have been going through a problem, and I am sure that you all would be able to guide me on the further course of action.

To begin with, I would like to give a summary about myself. I have more than 8 years of experience in Corporate Sales, and my last job was with an MNC for a period of 3 years. This was my third job in the last 8 years.

1) On the last day of my serving the notice period of one month, my employer asked me to sign a document printed on the letterhead (not a legal stamp paper). The document stated that I would not join any of their competitors for a period of 6 months. I was told that this was a mandatory procedure for releasing the full and final settlement. Even though I was about to join a competitor, I signed the document so that I could get my money. Doing a back-of-the-envelope calculation, considering my tenure in the organization, my guess is that the amount due to is about a lakh of rupees.

2) Even after 6 months, they have not made my final settlement, and they claim that they are withholding it as I have joined their competitor.

I would like to know if the company can withhold my money or if there is any way in which I can claim my money going through the legal route.

A close scrutiny of my Form 16 reveals that they have deducted tax for the salary of the notice period that I served and was to be paid along with the final settlement.

I am right now in a very confused state and would request you all to shed some light on this issue.

Please do let me know if there are any specific queries that will help you give me a better solution.

Looking forward to your guidance.

Thanking you,

Regards,

Nimit

Mumbai, India

Dear Nimit,

The non-compete clause, while relieving, will not work for any Indian organization. This has to be detailed at the time of the employment agreement. No company can withhold full and final settlement as it becomes its legal obligation. Please do write to their HR function for the F&F settlement.

Regards,
Srinivasu

Hi Nimit,

Read your post and realized how mean the HR department can be!

To begin with, I would like to give a summary about myself. I have more than 8 years of experience in Corporate Sales, and my last job was with an MNC for a period of 3 years. This was my third job in the last 8 years.

1) On the last day of my serving the notice period of one month, my employer asked me to sign a document printed on the letterhead (not a legal stamp paper). The document stated that I would not join any of their competitors for a period of 6 months. I was told that this was a mandatory procedure for releasing the full and final settlement. Even though I was about to join a competitor, I signed the document so that I could get my money. Doing a back-of-the-envelope calculation, considering my tenure in the organization, my guess is that the amount due to me is about a lakh of rupees.

2) Even after 6 months, they have not made my Final settlement, and they claim that they are withholding it as I have joined their competitor.

Any document regarding the terms of employment, especially with a competitor's clause, is usually signed at the beginning of the job and has to be on the stamp paper. Do you have a copy of the same? It's important as it would mention the date which was your last working day.

I would like to know if the Company can withhold my money, or is there any way in which I can claim my money going through the legal route.

Absolutely, you can and you should!! Consult a lawyer.

A close scrutiny of my Form 16 reveals that they have deducted tax for the salary of the notice period that I served and was to be paid along with the final settlement.

Tax on salary for the notice period is okay. If they have taxed your F&F dues not paid to you, then you have a right to claim the same.

Regards,
Rajat

I am right now in a very confused state and would request you all to shed some light on this issue. Please do let me know if there are any specific queries that will help you give me a better solution.

Rajat,

Thank you very much for your insights. However, I would appreciate more of your advice on this matter. Three months ago, they sent me a legal notice through a lawyer's office, alleging that I had breached the employment contract and demanding my entire year's salary. I chose not to respond as it was merely a letter from a law firm and not from the court. (Please let me know if my decision was correct).

Moreover, when I attempted to discuss this issue with the top management seeking assistance, they responded rudely and resorted to verbal abuse. Despite my efforts to communicate via email, they have not responded to any of my messages. Additionally, they have been spreading false information to my former team, suggesting that I wish to return and that they have taught me a lesson through unethical means. Personally, I do not wish to engage in this situation further, as my primary concern is the financial aspect. However, I seek guidance on how to address their behavior.

Currently, I am in urgent need of funds. Despite my dedicated service over the past three years, consistently delivering exceptional performance as one of the top sales professionals in the country, the treatment I received upon departure has greatly demotivated me. I now struggle to maintain the same level of passion in my new role, fearing a similar outcome where I may risk losing my income, given that my current employer is also a multinational corporation.

I look forward to your response. There is much more happening emotionally that I find challenging to articulate in writing. I hope you do not mind my reaching out to you again.

Thank you for your valuable input.

Regards,

Nimit Panpalia

Company has sent me the full and final attachment for my approval. I have approved and signed it, and also returned the scanned copy to the company by email. The company is not only refusing to give me the full and final settlement but also not paying me. What shall I do?

Uttam

Dear,

This type of agreement does not have any legal value in India, and no one can ban you from taking an appointment with a competitor. They cannot withhold your full and final settlement. Send a legal notice through an advocate and file a case.

Thanks,
J. S. Malik

This practice is a violation of the fundamental rights of Indian citizens. This is against the law and human rights too. Employment is the choice of the employee. The employer does not guarantee that after leaving his employment, if you don't find any alternative employment for or within the next six months as stated in this clause, the employer will not compensate salary because you have honored this clause of the agreement and because he imposes these restrictions not to join his competitor.

There is no balance of justice, and this is one-sided favoring the employer's choice, therefore not tenable under any law. You can ask for the recovery of money due from the employer clause under section 33C2 of the ID Act and refer the matter to the labor Commissioner for conciliation; the matter will be resolved amicably.

Badlu