Is It Fair for My Company to Block Me from Competitors Without Extra Training?

I am working with an organization based in the Delhi/NCR Region. I was asked to sign a bond with the company on A4 size paper, which prohibits me from joining their competitors for a period of 1 year after leaving the job. The names of the competitors are also mentioned. The company asks employees to sign on a stamp paper when they submit their resignations; otherwise, they refuse to accept the resignation and don't provide the relieving letter and dues.

On breach of the agreement, the company also asks employees to pay an amount equivalent to 1 year's pay. However, the company did not provide any additional or special training and thus did not incur any additional cost in training me. Please advise. Kindly also note that most of the interview calls I receive are from the companies mentioned by my employer as their competitors.

Regards,
Sachin

Please note that the situation you mentioned is pretty common among domains/sectors where there are limited players. This is also common for specific positions/functions that, as per the company's view, are critical to their operations, and such an employee joining any competitor would be detrimental to their interest.

Non-Compete Clause

In short, this is called the Non-Compete Clause. This is different from the bond you spoke about, which is usually linked to any training given by the company.

However, there's a difference in what your company is practicing and the generally accepted industry practice of the Non-Compete Clause—this is a part of the Offer/Appointment Letter and not the resignation process. Any person is expected to join any company after going through all the relevant clauses and conditions of employment—of which clauses like this also form a part (another common clause being Non-disclosure).

Legally, being asked to sign the Non-Compete Clause after resigning is untenable.

I suggest you wait for the legal members of this forum to respond—they will be able to give you better suggestions. But I guess you will need to consult an advocate for sure.

All the Best.

Regards,
TS

Such a bond will not hold good in the Court of law in India. The Supreme Court and other lower courts in India have struck down such draconian policies of companies. Currently, such bonds are just a way to intimidate employees into "not resigning."

We have discussed this at length in various discussions on the Citehr forum with expert comments, which you can research for your information.

My suggestion is not to worry much about such bonds but be loyal to your ex-company and do not disclose any of their trade secrets to their competitors at any cost. When you resign from such companies, maintain absolute discretion in moving to your new company and job.

Wishing you all the best.

Regards,
Ukmitra

This issue was discussed thoroughly earlier. This type of bond is illegal.

Regards,
Varghese Mathew

I would like to further add a few more points:

The clause prohibiting employees from joining competitors is present in the appointment letters of all the employees of this company and is not limited to any specific positions or functions. I am in the role of an assistant manager in marketing and, therefore, do not have access to the trade secrets of the company.

The clause prohibits employees from joining competitor companies even in other functions or business areas rather than just the verticals or functions that are in direct competition with my employer.

Thanks,
Sachin

As explained by others and also reported in other discussions on this forum, the so-called restrictions are not enforceable, and you can go ahead and join any of the mentioned companies. The company can do nothing to stop you. Even the signature on stamp paper is invalid as it comes under the rule of coercion. If possible, take a copy of the bond you sign.

On the practical side, go ahead and sign any bond they give you upon resignation, obtain the relieving letters, and do what you want after that. If they do file a case, you can hire any decent lawyer to have it dismissed and recover the costs from the employer. But I don't think they will even file a case against you for this. Their lawyers also know it's not tenable.

I would say that there is no need to accept such conditions from an employer, which are totally unethical and unprofessional. You must inform the Labour Inspector/Commissioner immediately with a written complaint from a minimum of 10 employees of your company to seek help in this regard.

Second, I totally agree with Ms. Saswata that the company has no right to force such conditions on employees in any case. However, if such conditions have been applied or introduced in the appointment/employment letter, and employees agreed to the same by signing a bond at the time of joining, they can do so.

“Hope there is nothing mentioned in the appointment letters of employees like 'Employer reserves the right to retain employees and hold/refuse their clearance until such bond conditions are accepted by employees.'” If there is nothing like this, you and other employees of this organization are advised not to sign any bond while resigning. When the employer refuses to give clearance for their exit even after following the terms of leaving/notice period, a written complaint needs to be filed as stated above.

However, I understand that due to tough competition, allurements to employees by competitors have become a common trend in the market. “How to poach an employee from a competitor” has become a common practice, which is one of the big attrition/high employee turnover problems today. But still, such a style of fighting with this problem is not acceptable.

I'd request you to file a written complaint to the Labour Inspector/Commissioner, or else follow the suggestions provided by Mr. Ukmitra and Ms. Saswata, which are practical and valid.

Best of Luck

As rightly pointed out by other members, these kinds of bonds and declarations have no legal sanctity and hence cannot be executed by your employer. This means that they cannot force you or obtain a court decree forcing you to pay any money as agreed in the bond or otherwise. It is simply a psychological deterrent. While not every employee may be affected, at least a few will be intimidated by a paper tiger. As an employer, this is a slightly better situation than having none to bother with! They are attempting to instill fear, which is neither uncommon nor significantly draconian.

Cheers

Employment Contracts and Employee Rights

Employment is a contract between the employer and employee for mutual consideration. An employer cannot force their employees to sign any kind of bond that is detrimental to the interests of the employee. An employee is free to join any company by leaving the present company they are working in after legally getting relieved. Note that any agreement in restraint of employment is void under the Indian Contract Act.

Regards,
D. Phani Kumar
DGM-HR
Vasavadatta Cement
(A Unit of B.K. Birla Group of Companies)
Sedam, Gulbarga Dist.
Karnataka.

Well, Mr. Sachin! You are in big trouble now, isn't it? What my other friends wrote is absolutely correct. These kinds of bonds are not legal. So what?

What they could not visualize is how to go ahead with this. You sign the bond with closed eyes and grab this opportunity to take a hike from the prospective employer as well. Tell them, "Sir, I am very much interested to work with you only and you only. I will never go to any of your competitors, including those whose name is not there in the list... but kindly consider my prospect as well... do give me a little more hike or a better position, etc." Try to encash this in your favor. This is a good opportunity for you; grab it.

To be very honest, they will not go to court since this will not be sustainable before the court of law. As per the Constitution of India, all Indian citizens are free to opt for their trade and profession. Unless you do something illegal (it is not illegal to join their competitor within 1 year), you can join anywhere of your choice.

Please contact in case you face any further problems.

Appreciate your suggestions to Sachin and other members of the forum. Would like to share my practical experience in such a case wherein I was the HR manager of the company. The company had a policy of having all employees sign an NDA (Non-Disclosure Agreement), binding them to not join any competitors for 18 months after leaving the company. This policy is entirely legal. However, a few employees did not take it seriously and joined a competitor. I took action against these employees, representing the company in court for many hearings. Eventually, the company won the case and recovered money from those three employees.

Advice on Signing NDAs

My advice to all of you is to be very cautious before signing any such documents with your employers. If the company has a robust legal department, they will likely take action. If the company lacks a legal department, they may not pursue legal action unless the employee possesses critical trade secrets.

Regards,

Hi All,

Thanks for your valuable comments. I would like to request your input on the practical aspect of this practice being adopted by my employer—let's say Company A.

Non-Compete Clause Enforcement

Not signing the non-compete clause is generally not an option for the employee, as such agreements are forced upon the employee by Company A at the time of joining the company, not during the interview or when the offer letter is given. Therefore, employees are left with little choice.

To enforce this bond/non-compete agreement of not joining a competitor, Company A takes about 4 months to provide a relieving letter to employees, despite the policy stating that relieving letters should be given within 45 days of the last working day. This delay is due to the company checking if the employee has joined any competitors, such as Company B.

Additionally, the new employer may disclose its name/identity during background checks. In such cases, my current employer, Company A, may create issues in providing a relieving letter.

Seeking Advice on Transitioning to a Competitor

Please suggest what approach an employee should take when moving to a competitor and the difficulties they may face if they do not receive the relieving letter, especially if Company A discovers that the employee has joined a competitor, like Company B.

Thanks,

Sachin

Employee Contracts and Bonds

Some companies have contracts or bonds that employees are required to sign for a certain period of time. During this specified period, employees are obligated to stay with the organization to help retain talent and reduce the attrition rate.

My suggestion to you would be that if you truly wish to join a competitor for whom you have signed a contract with your current company stating that you will not join them, you should share the contract with your new employer. After reviewing your existing contract, if the new company decides to hire you, they may take responsibility for any legal proceedings in this case. They may also allow you to join without the experience letter. No other approach seems viable for an employee in this situation.

Regards,

Hi, this is a very surprising note from you. I am eager to get your court case number, year, and court details. If you can share with us the order details, it would be great. - Ukmitra