Appointment Letters: Do They Need Government Approval and Can We Restrict Competitor Employment?

Please guide me on whether the appointment letter needs to be approved by any government authority. Our management also wishes to include a clause in the appointment letter stating that after resigning from the organization, the employee should not join any competitor organization for at least 6 months. Kindly advise if we can include this clause.

With Regards,
Ms. Dhanya

To my understanding, there is no specific provision in the law, but standard letters should be issued in compliance with standing orders. These standing orders should be pre-approved by a competent certifying body, referred to as the "appropriate government".

Obtaining approval from any government authority for appointment letters is not required. No employer can insist on any employee joining a competitor company. Whatever skills the employee has will be used in the next/new company; hence, the employer cannot insist on joining a competitor company.

Your query regarding the appointment letter(s) being approved by the government authority isn't clear and doesn't make sense. Could you please elaborate on the reasons for this query? That could help the members understand things from the exact context.

Non-Compete Clause in Appointment Letters

Regarding adding the point 'not to join any of our competitor organizations,' this is called a Non-Compete clause in HR parlance, which is quite common nowadays in many companies. However, there have to be very valid and legally tenable grounds/reasons to introduce this clause in the appointment letter. If not, then the company is bound to face legal problems in the long run if any employee goes to court. I would suggest you involve your company's legal counsel while deciding this issue.

Regards,
TS

Thank you for your valuable reply and suggestions. Our management wishes to include a clause prohibiting the individual from joining any of our competitor organizations in the appointment letter. Therefore, they require it to be signed and approved by the government authority.

Regards,
Dhanya

As I mentioned earlier, including the said clause is indeed possible, but it must be ensured that the reasons are legally justifiable and valid. Companies in some domains/sectors may face challenges when such clauses are introduced. Usually, such a clause is introduced only for critical positions (in Sales, R&D, etc.)—typically senior-level ones—where the risk of the company losing business or secrets is high if an employee leaves to join a competitor. Implementing this across the board will be tough and impractical. What if employees begin to leave due to this reason—will the management be ready for such a scenario? What is your company involved in?

Also, I don't understand the logic behind getting the 'approval by Government authority'—please elaborate on the reason(s). Why should the government approve or disapprove any appointment letters of a private company, in the first place? As far as I know, there isn't such a mechanism at all.

Regards,
TS

Dear Seniors, After how many days/months do we need to provide the appointment letter? Is there a specific timeline for issuing the appointment letter? Please share your suggestions.

Regards,
Khushbu

Importance of a Formal Appointment Order

How do you expect somebody to join the company without a formal appointment order? At least a one-page letter giving details of designation, probation/training period, gross salary, and length of service/retirement age needs to be given. The new joinee is expected to sign a copy and give it back to you as an acceptance, and this paper will be filed in his personal file.

Regards,
D. BALAJI

Please provide the competitor clause in the appointment letter's terms and conditions. Also, kindly share a sample appointment letter format.

Regards,
Laxman Dalavi
HR Executive
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