Facing Termination for Side Business: How Should I Respond to My Employer's Threats?

I have been working in a company. Then, I started my own business while on their service during the probation period. They came to know about my business as, in my free time in the office, I accessed the website relating to my work. That business is the same as the company's business. They are threatening me, stating that I have breached their trust and that they will file a case against me.

There are no terms and conditions or any kind of agreement that prohibits me from engaging in any other work/business that may or may not interfere with the company's targets. Simply put, my offer/appointment letter only states, "We are grateful to appoint you for the XYZ position with XYZ salary CTC. You are on a 6-month probation period, after which you become a permanent employee, and then your services are terminable by either party with a 15-day notice period or salary in lieu of it."

Additionally, the company is not registered with the Government of India.

Please advise me on what I should do. They have not given me any warning or notice that I should not repeat or continue my personal work. Instead, they have directly sent a termination letter.

Before replying to your question, I would like to know a truthful answer from you. As you stated that you have started your own business, which is in line with and in direct competition with your employer, if the same situation happens in your newly started company, would you allow the person to do the same business as yours?

Please reply to this query, and then other fellow members will also be able to give their comments.

Regards,
Preetam Deshpande

Further to what Preetam Deshpande mentioned, it looks like (mind you—this is a 'perception') you actually planned it out, taking into consideration the lack of any specific clauses in the Offer Letter related to actions that create a conflict of interest situation. You didn't mention your experience level, but my gut feeling is that you are NOT a fresher. Obviously, you ought to know the consequences of your actions—as the legal saying goes: ignorance of the law is not an excuse.

Regards, TS

Dear Vishnuelectric,

Just wanted to know, does this mean that you have no problem with termination if the warning or threatening is practiced by the company? If they would have done so and still if you would have continued a parallel business, then the termination is a valid one, right? What is it that you are worried about - being terminated or not being warned?

Code of Conduct and Parallel Business

At the first place, it is a code of conduct that one should not run a parallel business of the same nature when employed - it is similar to dual employment. If your company has not mentioned it in the appointment letter, does that mean that you would not follow the code of conduct?

Regards

The act done by you can be regarded as stealing the company's business. You and the company in which you are working are in the same business, thus it is quite hard to believe that you didn't take advantage of the company's existing customers. Also, a competitor cannot work for the company. Thus, the company has every right to terminate you and sue you for your actions.

Regards,
Gurpreet Aidhen

Mr. Vishnu, M/S Preetam/TS rightly advised you. Since you were on probation, there is no need for any notice or warning. The services of a probationer can be terminated without notice.

Regards,
pkjain

The company has committed an illegal act by terminating your service without conducting an inquiry. Firstly, a probation period of 6 months is not permitted by law. Only a 3-month period is allowed. In your case, in fact, you can file a case against the company.

Regards,
S.M. Paranjape, Adv (Labour Law Consultant) [Phone Number Removed For Privacy Reasons]

Probation Period and Legal Implications

Indian labor laws permit a 3-month probation period. However, if your employers have a signed document from you accepting a 6-month probation period, then you cannot take legal action against them.

Illegal Actions Under Indian Labor Laws

Additionally, Indian labor laws deem the following actions illegal, which may result in charges:

1. Holding two or more employments or professional commitments with independent organizations without informing all the concerned employers.
2. Establishing a business or seeking employment with an organization that could directly compete with your current assignment.
3. Using office infrastructure for personal use without management consent.

Unfortunately, you are in violation of all three accounts.

My advice is to consult a professional before the situation escalates.

Regards,
AM
[Phone Number Removed For Privacy Reasons]

I think you need to do some introspection and try to find out whether what you did (personal parallel business while being in a job) was correct. In fact, Mr. Preetam has rightly pointed out that even you wouldn't have tolerated it if your own employee had engaged in the same parallel business as you. Personal business while being in a job is not allowed, and almost all companies prohibit their employees from engaging in any type of business while employed. This clause is commonly included in most appointment letters. If this clause is not explicitly mentioned in your appointment letter, it does not mean that you can do everything not specified in the letter. Ignorance of laws/rules is not an excuse. Many companies also restrict their employees from joining competitors within 2-3 years of leaving the company.

You utilized the company's resources, secrets, and technology (formulas, drawings, etc.) to conduct your own similar type of business, which is unacceptable. The company is justified in terminating your employment.

Regards,
Rakesh Pd Srivastav

When the law prescribes a 3-month probation period, the company cannot extend it to 6 months or any duration exceeding 3 months, even with the employee's written consent. The law cannot be altered by a private contract, as this would enable all employers to bypass legal provisions easily.

Secondly, even if you were conducting business while still being employed, the company cannot terminate your employment without first issuing a show-cause notice and conducting a departmental inquiry. The principles of natural justice must be adhered to before termination to ensure that the process is lawful.

Regards,

Sameer Paranjape, Adv (Labour Law Consultant) Pune [Phone Number Removed For Privacy Reasons]

"Ignorance of the law is not an excuse! What you are doing is highly unacceptable for any employer; it is a breach of trust and confidence of management."

Confidentiality and Ethics in Business

It is unacceptable and goes beyond basic ethics. "The protection of confidential business information and trade secrets is vital to the interest and success of the company."

Regards,
ASK

Legality of Unregistered Companies

What if the company is not even registered with the Ministry of Corporate Affairs? It is neither a Pvt. Ltd., nor a public company, nor an LLP. Is it not illegal?

No contact phone numbers or email IDs on the offer letter, no terms and conditions of employment, no policy. Also, my business has not affected the company's target or revenue because neither of the company's products conflicts with mine. So clearly, their business is not affected.

Addressing the Issue of Business Conduct

TS has a point. If the intentions were not wrong, then either you should not have joined or should have left before starting your own business. You've already mentioned that you used the company's resources, like using the website for your personal use—this too amounts to a loss on the company's end, namely its resources and time, and secondly, using its policies and customer base for your personal gain.

Dear Vishnuelectric, from what you've mentioned, it clearly implies a completely wrong act.

Regards

No company will provide you with these guidelines in the appointment letter; we have to follow some rules and regulations while working in a company, and it is our responsibility! Even if you start a business and do it in your free time, it doesn't matter, but if you are doing it in the office during working hours, it becomes a problem for you, which is not acceptable! Therefore, it is better for you to accept termination silently!

Dear Vishnu, what you have done is not the right thing, and the company has every right to terminate you without any notice or warning and can sue a case against you for breaching its trust.

Regards,
Srilakshmi Korukonda