How Do I Include NDA and Non-Compete Clauses in a Probation Termination Letter?

We will terminate one of our employees during his probation period due to poor performance. We have had him sign an NDA and a non-compete agreement. Can anyone help me with how to include the NDA and non-compete clause in his termination letter?

Thanks,
Pradnya

If you have already signed an NDA and NCA with the employee mentioned earlier, then it is not necessary to mention it again in the termination letter. You can verbally remind him about the same. Let me know if you have any other concerns regarding the subject.

I don't see a reason to mention the NDA/NCA in his termination or relieving letter at all. In fact, since the non-compete component is actually not valid in law, you should resist the temptation to sign it in the first place.

Let's face it - it is highly possible that you may have hired the wrong person, and that reflects on your selection process. Why would you want to harm a young person's career for that mistake?

All the best.
Regards.

Has an appointment letter been issued to this employee? Or are you planning to re-issue one for him? If you wish to include information about the NDA/NCA in the appointment letter, the following clause can be added:

Non-Disclosure/Non-Compete Clause

You will not disclose, by word of mouth or otherwise, any particulars or details of business plans, trade secrets, financial information, know-how, or any other confidential information of the business that comes to your knowledge through your employment at XXXXXXXX India Pvt. Ltd. Details regarding non-compete conditions will be explained and specified in the Non-Disclosure & Non-Compete agreements, which will be provided to you for signature on the date of joining.

The query was about the termination letter and not an appointment letter. 

Thank you.

Handling NDA and Non-Compete After Termination

How will NDA/Non-Compete matters be handled after termination? Do you think mentioning it in the termination letter will affect the employee? Furthermore, what legal actions can be taken if the terminated employee joins a competitor and discloses sensitive information? Since the employee is no longer working with you and was terminated during the probation period, what legal recourse is available?

Regards,
[Username]

Are you looking forward to issuing him an experience certificate and a relieving letter? How are you planning to issue this termination letter to him? Even if your employee is terminated, please don't issue any relieving document sharing the termination of services. Let the discontinuity of the services remain an internal process. Issue a normal relieving letter with his employment details. If you avoid mentioning any details about the termination, you help him build a career beyond your firm. No matter what the reason for termination is, a misfit somewhere is a high performer somewhere else. The performance of an employee is often a result of the environmental support he receives. Hence, putting non-performance as a reason for termination in the letter might backfire on you as an employer. Please keep this in mind while processing the document. Wish you all the best!

Validity of NDA and NCA Clauses

The NDA and NCA clauses are legally valid only during the period the employee is in your service.

Regards,
Varghese Mathew

Interesting quote. Is there a law to back it up? Usually, we carry forward the Non-Compete clause to a period of 2-3 years post-exit date.

Suggestions for Handling Non-Compete Clauses

Two suggestions:

1. Add a statement (if really required) in the termination letter, "Please abide by the NDA and Non-Compete clauses signed by you during appointment." This is subtle and reminds him/her of the clause.

2. Create another letter mentioning the clauses, and get it signed by the soon-to-be ex-employee during the exit process.

Cheers,
Nischala

Mathew has been very detailed in his exemplification with cases in point. Clearly, there is legal precedence in the topic, and that is a great start.

Legal Precedence and Suggestions

With regard to your suggestion no. 1: "The Supreme Court in Superintendence Co. of India v. Krishun Murgai, AIR 1980 SC 1717, has ruled that under Section 27 of the Contract Act, a service covenant extended beyond the termination of the service is void."

The same holds true for suggestion no. 2 as well. If the employee is smart, he/she will not sign any such document.

Regards.

Relevant Legal Framework for Termination

The law in this regard is Article 19(g) and 21 of the Constitution, Section 27 of the Contract Act, and several case laws like the one referred to by Mr. Madhu and others.

Regards,
Varghese Mathew