Can a Former Employer Control Where You Work Next? Seeking Advice on Legal Claims

I would like to know if a company has any authority to control their ex-employees after they have been relieved. I have heard of a situation where a person received communications from their previous employer stating that the person is working with a company that was a client of the ex-employer, with whom this person worked earlier. The previous employer mentioned that the person should not work in any way with this client company as it is illegal. However, during the employee's departure, they did not receive any list of prohibited companies or other related information.

Is This a Valid Claim?

The person is feeling confused due to the email communications. How should this be handled? The communication states that the person breached the employment agreement.

Please suggest a course of action.

Thank you,

Regards,
Heeru

A person needs to carefully go through their appointment letter and check the clause regarding working with competing companies. Please let us know.

Thank you, Govind, for the quick response. It was not a competitor, and the offer letter does not contain any such restrictions. The appointment letter consists of only two clauses, none related to this matter.

Thanks,

Regards

I am not clear whether the employee was properly relieved from the previous employer. Even if he has not informed the company about his quitting the job, and this query is after a few months or a year, then the previous employer has no hold, and he cannot question his next appointment. It is not illegal. The previous employer cannot do anything. However, since the present employer is the client of the previous employer, he may pressure the present employer to terminate him, giving some reasons as he has influence.

You say that he is relieved, and if so, the previous employer has no locus standi to control him or use him. If he is receiving emails, let him reply, stating that he is already relieved from them and is in no way responsible for any matters concerning the company. There is absolutely no confusion.

Handling Ex-Employer Communication Concerns

The employer cannot bind him or tell him that he cannot work with the competition. He just needs to respond back politely, stating that the terms of appointment do not specify this binding. However, since this issue has been raised, he is getting a legal opinion on this. The ex-employer will likely stop communicating. If he does not, then inform the current employer that the ex-employer is harassing him. If the HR department is proactive and caring enough, they will themselves get a lawyer to respond on his behalf. In case they don't help out, he may contact a lawyer to respond back, stating that he is being harassed and intimidated, and this is causing consequences in his performance.

Tell him not to worry. You have mentioned there are lots of emails. If it was legal, then by this time, the ex-employer would have written to the current employer about the violation of the contract and also would have initiated a legal case. So, tell your friend to be at peace.

Understanding Restrictive Covenants in Employment Contracts

A contract can sometimes include restrictive covenants or binds, particularly to prevent an employee from taking clients from a previous employer. These covenants have to be reasonable, or they will be ruled inadmissible by a court, so it is important for an employer to make reasonable demands.

One of the key things for an employee is that these covenants cannot be a barrier to them finding new work or employment. For example, a plumber could not be prevented from working in his local town. However, a covenant or bind that prevented the plumber from contacting existing clients of that business could well be deemed reasonable. Also, a time frame is of relevance in certain circumstances. There is no hard and fast rule, but often it comes down to whether an employee's actions can be deemed harmful to their previous employer.

Regards

Understanding Non-Solicitation and Intellectual Property Agreements

In some cases, there are agreements within the employment offer or signed afterward, which discuss non-solicitation and intellectual property protection of the companies. These are present in all employment agreements of major companies, specifically in technical and research-oriented companies worldwide. If there is an agreement that the employee has signed, his/her employer can initiate legal action based on the agreement. However, it is generally difficult for the employer to win such cases unless there is a direct and/or willful violation of the agreement.

Only in such cases does your friend need to fear any legal action; otherwise, he can simply ignore this. If he wants to counterattack, he may file a case in the labor court against the previous employer (but it is not suggested). It is also suggested that he reports this matter to his current employer/HR.

Regards

Unethical Practices in Employment Agreements

Of course, some third-rate organizations stipulate such conditions in the appointment order without fully understanding the implications. It is then accepted with a signature on the copy of the appointment order, setting a wrong precedent for the employer. If such conditions are to be adhered to and the employer vigilantly enforces them after the employee is relieved, I do not think these are good HR practices. The HR department should advise the top management with professional ethics.

If an employer is harassing an ex-employee in such matters, a PIL could be filed by an advocate for social revival. If an employer is objecting to an employee working for a competitor, supplier, or client company, we can assert that nobody in India would change their job to another employer in the same business. For example, employees who join a new employer after resigning and being relieved by the present employer in IT or ITES should not be punished for joining a similar employer.

Very unscrupulous HR practice.

I am very thankful for all your responses. Some people replied that there is confusion in my query. I would like to explain it in the following way.

Employee's Transition Between Companies

The employee was working with Company X on projects for Company Y for some time. At the time of resignation, the employee was not working on Company Y projects. After some days, the employee resigned from Company X, received their relieving letters and all clearances, and after a few weeks, got an offer from Company Y and joined them.

Company Acquisition and Employment Terms

Company X had taken over a division of Company Y, where this employee was previously working. However, no documents, agreements, or details were provided stating that employees should not work with Company Y. The employee has now joined an independent division of Company Y (another registration), which has its own existence.

Legal Concerns Raised by Company X

Now, Company X is stating that it is illegal for the employee to join Company Y, as this employee had once worked with Company Y through Company X. According to Company X's policies, employees should not work with companies that were clients of Company X, with whom the employee was involved during their tenure at Company X.

There is nothing in the offer letters or terms and conditions about such rules. Company X claims that the employee signed a document, but the employee does not remember anything of the sort, and there are no documents provided by Company X regarding the same.

It is so confusing that nothing can be understood. Whom are you talking about - the client company or the company the concerned employee worked with?

Clarification on Employer Reference

I am talking about the previous employer of the concerned employee.

Vijay

Employee Rights After Resignation

When an employee has resigned and joined another company, the previous employer has no right to stop that person from working for the new company. The relationship with Company X is over; the game is over.

Response to Concerns About Ex-Employer's Claims

When an employee has resigned and joined another company, the previous employer has no right to stop that person from working for Company Y. The relationship with Company X is over; the game is over.

Thanks for your response. However, Company X is sending a few threatening emails, causing concern. They are claiming that it is illegal. I couldn't understand how it could be illegal, especially since no list was provided or agreements made at the time of departure.

There have been instances where employees could work with almost 5 to 6 clients a year for Company X. Avoiding all those clients could be career-destructive for employees.

Another concern is that if, in the future, any company conducts a background check and Company X provides negative feedback, it could pose difficulties. The employee has dedicated almost 6 years to Company X, which was their first company.

Regards.

Service Contracts and Non-Recruitment Clauses

Many times, when companies sign a service contract with their clients for on-site engineers, they include a clause stating that the engineer would not be recruited by the client for a mutually agreed-upon period, even after the engineer has left the employer. This is done as a safeguard because the vendor company invests time and money in preparing the engineer for the on-site job, and it would be unfair if they did not receive a return on investment (ROI). After the predetermined period, the engineer is free to join the client, and the client is free to recruit the engineer if they wish.

Is this the scenario in your case?

Service Contracts and Employee Restrictions

Many times, when companies sign a Service Contract with their clients for On-Site Engineers, they include a clause stating that the engineer would not be recruited by the client for a mutually agreed period, even after the engineer has left the employer. This is done as a safeguard because the vendor company invests time and money in preparing the engineer for the on-site job, and it would be unfair if they did not receive a Return on Investment (ROI). After the pre-determined period, the engineer is free to join the client, and the client is free to recruit the engineer if they wish.

Is this the scenario in your case? Thanks for the response.

No, here it is not ONSITE. As mentioned earlier, the Company Y division in which the employee is working was taken over by Company X, and the employee was working on the same projects for some time. Now, the employee has received an offer from Company Y's other division. For ONSITE engineers, the company requires them to sign a bond for a specified time period, stating that the employee should not leave until that time.

In the scenario you mentioned, the companies need to discuss the terms and timelines rather than imposing them on the employees. How would employees know about their agreements? Employees are concerned with growth, culture, and opportunities. Correct me if I am wrong.

Thanks

Vendor and Client Company Agreement on Employee Hiring

Usually, the agreement is between the vendor company and the client company. The client company "will not hire" any employee from the vendor company during the contract period and the cooling-off period. When the client company has agreed not to hire, there is no need for any agreement with the employee.

If the client company violates the contract unknowingly, the vendor company will send a notice to them to discharge the said employee from his duties, and the client company has to comply. However, if they do not comply, the vendor company can take the client company to court for violation. As a worst-case scenario, the employee will have to find another job.

Handling Harassment from a Previous Employer

Inform the current company that the previous company is harassing them. Also, write back to the previous company stating that you will be forced to file a police complaint for harassment. If the harassment persists, proceed with filing a police complaint. Once the police summon them and question them about the grounds for the harassment, the individuals responsible will likely cease their actions. It's even more effective if you have a good relationship with the police. This can be helpful in resolving the situation promptly.

Handling Employment Changes: Employee Joins Another Company

Thank you for reaching out with your question. If an employee has joined another company at a different location, the company would typically update their records and handle the situation according to company policies and procedures. This may involve terminating the employment contract, transferring the employee to the new location if feasible, or any other appropriate actions based on the circumstances. It's essential for companies to have clear policies in place to address such situations efficiently and professionally.

Regards

Kindly check whether your friend has signed any Non-solicitation Agreement while joining that company. If so, there is a possibility that they can claim if it contains any clause related to the issue.

Also, is the client your friend is currently handling an existing client from his previous company, or did he only add the client to his previous company?

Based on this, your friend's case varies with specifications in the NSA.

Thanks, Purni, for your reply. He does not remember any such agreements, and from my understanding, if he had signed any such agreement, then a copy of the agreement should be provided. However, there are no papers of such kind.

Yes, the company he is working for now is an existing client of his previous company. He was not in sales or services in his previous company to add clients. He is an engineer, and he does not have any confidential business data or never worked on such assignments, just a good outstanding employee.

He left the organization and joined the organization that is a client of his previous company; my friend worked for this client some time ago. It seems that the company wanted to add this person to the same client for huge bucks... but my friend got disturbed by the workload and wanted to move out. The company, after tendering resignation, gave options but he lost faith and decided to quit.

Now the company is saying it is illegal to join their clients, and stating that it is according to NDA or agreement, which my friend does not have. He also spoke to his colleagues, and no one has the agreement copies with them.

Tell your friend to ask for the so-called NDA, which they claim he had signed. They will provide it if he has signed. In any case, it's only a nondisclosure agreement and not an agreement that curtails him from taking up a job. In his position, he does not have any access to strategy, and hence, even the NDA will not be relevant or applicable, even if he has signed it.

Yeah, that's true. NDA/NSA copies cannot be provided to the employees. They are just for signing purposes and can be filed. In this case, he can ask for the copy in which he signed to show his lawyer for further proceedings. Also, some exceptions would always be there in any clause.

Understanding NSA/Confidentiality Agreements

In an NSA/Confidentiality agreement, it is mentioned that the employee should not seek employment with the client, but it includes a specific duration, such as one year or two years from the day he left the previous company. At least for these sub-clauses, he needs to obtain the copy from them.

Support from Current Company

If his current company's management supports him in this regard, it could be easier for him to proceed. He should consult the HR/legal department of his current company as they are the client for the previous company. There would also be an agreement between the two companies concerning employment issues, allowing both companies to communicate on agreed terms.

Thank you again for your response. However, any agreement should be between two parties, and both parties should have copies of the documents, regardless of NDA/NSA. In this scenario, let's assume that the employee signed the document upon joining the company, and after 7-8 years, they are leaving. The employee will review all documents in their possession to determine their next steps.

If the employee does not have copies, how can they remember the details? Additionally, if the employee has worked with around 20 clients, some for a short period and some for a longer duration, it becomes challenging to recall all interactions. Shouldn't it be the company's responsibility to provide all necessary documents (at least copies) upon the employee's departure? Why should the employee have to engage in extensive paperwork to obtain these documents when the company could easily provide them? In this case, my friend could not recall such documents, so he pursued the new opportunity.

It is reasonable to expect that for ONSITE assignments, companies would require a bond or confidentiality agreement, with both parties retaining copies.

Fundamentally, it is an individual's right to choose their job. However, the crucial consideration is the protection of confidential information.

In the event of an NSA breach, what would the implications be?

Thank you.

Legal Claims and Exceptions

That is the reason why I asked your friend to request a copy of the document on which they are basing their legal claims. This way, we can check for any exceptions in the clauses mentioned in the document. There will likely be exceptions in every case.

Companies' Approach to Legal Action

Additionally, most companies prefer not to pursue legal action against former employees. This is because any legal dispute can be time-consuming and costly, ultimately wasting productive time on a single ex-employee. During the course of legal proceedings and conclusions, many unforeseen events may occur. Therefore, companies generally avoid legal action for minor issues. There could be other reasons why they are pursuing legal action against your friend's company. I suggest considering this possibility.

Thank you, Purni. The company hasn't initiated any legal proceedings; they have sent a threatening email and subsequently another email requesting a response. According to them, failure to comply with the agreement/NDA (which they claim has been signed) will result in legal action, with the current employer also being informed. My friend is adhering to the guidelines of the current employer and is currently not responding to their emails as the present employer is handling the communication. Another concern is how this might affect a background check in the future...

Thank you.

The company has absolutely no control over an employee once he ceases to be an employee of the particular organization. The ex-employer cannot dictate terms to ex-employees about his future employment. It is an accepted practice in the industry to recruit competitors' employees due to their expertise, knowledge, and other skills.

Confidentiality Undertakings

Some organizations take a Confidentiality Undertaking from the employee at the time of joining, not to divulge any information related to their intellectual property. If the ex-employer learns that the ex-employee has disclosed certain key information vital to their business, then there is a possibility of the ex-employer taking legal and criminal action for such deeds.

That is why an employee has to be very careful while signing any agreement that can be used as a checkmate to his career prospects in the future by the ex-employer.

However, as long as the employee did not sign any confidentiality undertaking or any document barring him from joining the ex-employer's clients or competitors, he need not worry.

Regards,
Madhusudan

Thanks a lot for your response. I will reiterate the sequence of events:

1. **Resigned:** After many attempts to prevent him from withdrawing his resignation, the company accepted the resignation and provided proper relief by issuing the relieving and service documents.

2. **After a Few Days:** He joined the company, which is now his previous company but currently the client (the department where my friend works was taken over by this new company that is responsible for gratuity).

3. **Subsequent Communication:** The company's HR department sent separate emails to my friend and his employer stating that his rejoining his ex-company was illegal based on the employee agreement. However, there is no copy of the employee agreement, and my friend does not recall signing such an agreement. This was also confirmed by their colleagues. As advised by his current employer, my friend did not respond to the emails as they informed him there were no illegal actions and they were communicating with the concerned parties.

4. **After 45 Days:** With no full settlements or gratuity provided, my friend contacted the HR representative and discovered that the funds were being held due to lack of response from him.

Regards.

Here, one thing appears to me that if your friend had done anything contrary to any of the terms of the contract of employment, then the company will not relieve him at all and issue him his relieving and service certificates. Gratuity is also a part of the full and final settlement. Both are not separately settled. The company appears to fear that your friend knows too much about some vital information on the shady deals of the company, hence apprehends that he may divulge that, which may cause some loss to their business and reputation, hence this harassment.

Let him approach the local Labour authorities with all appropriate documents and a letter addressed to them narrating the whole story, with correct details, to deal with the issue. Once the Labour Department interferes, things will change. If things at the Labour Department do not move as expected with lower rank, then let him approach the higher authorities of the Labour Dept. for intervention and justice.

Regards,
Madhusudan

It is very unclear why the company is behaving so meanly! They are talking to their ego. Due to my friend leaving the company, they might have lost some monetary gains. They tried a lot to stop him, as they could not build confidence. My friend chose to leave.

Now, my friend responded to the mail request to release gratuity and full and final, and there is no document signed that would restrain him from taking up other jobs. He requested to share the document if any.

They said that they responded that they gave the document and would share the documents only with a legal notice. They are now initiating (after mentioning that they blocked gratuity) the process of gratuity. But full and final only after things are cleared. They are trying to misrepresent the facts.

The main worry is not about money, but about the damage they might make to the career. We think we have tolerated much and would like to reach the labor department. Is it correct? If so, can we go to the legal department on a harassment case?

Please guide.

Thanks.

As suggested earlier, let your friend take legal advice and let him act based on the legal advice. An alternative course of action is to lodge a complaint with the Labour Department, providing all facts, figures, and complete details. No company can stand a chance of winning a case by submitting fabricated details if your friend is not guilty.

With regards,
Madhusudan